NN, Inc. (Nasdaq: NNBR) today reported its financial results for the first quarter ended March 31, 2010. Net sales for the first quarter of 2010 were $85.3 million, up $27.4 million, or 47.3% compared to $57.9 million for the same period of 2009. The increase in net sales was due to increased demand of approximately $29.1 million for the Company’s products in industrial and automotive end markets. The positive effects of foreign currency translation accounted for an additional $2.4 million of the increase. These increases were offset by the negative effects of raw material pass through and mix changes of approximately $4.1 million.
Net income for the first quarter of 2010 was $0.2 million, or $0.01 per diluted share as compared to a net loss of $9.5 million, or $(0.59) per diluted share for the first quarter of 2009. First quarter 2009 results included the write-off of unamortized loan costs associated with the Company’s prior credit agreement of $0.4 million net of tax, or $0.02 per diluted share and restructuring costs associated with the previously announced closing of the Kilkenny, Ireland and Hamilton, Ohio facilities of $0.5 million net of tax, or $0.03 per diluted share. Excluding these charges, net loss would have been $8.6 million, or $(0.53) per diluted share. The results for the first quarter of 2010 include non-operating and special charges of $1.1 million net of tax, or $0.7 per diluted share. Excluding these net charges, net income would have been $1.3 million, or $0.08 per diluted share. Details of these charges are:
Accelerated depreciation for assets at our Tempe Arizona facility that will be taken out of service (included in depreciation and amortization) of $1.0 million pre-tax and net of tax, or $0.06 per diluted share.
Accrued severance payments of $0.5 million pre-tax and net of tax, or $ 0.03 per diluted share associated with the closing of the Tempe Arizona facility.
A foreign currency gain of $1.1 million pre-tax and $0.9 million net of tax, or $0.06 per diluted share due to the positive effect of currency translation on intercompany loans.
$1.1 million pre-tax and net of tax, or $0.07 per diluted share in non-cash charges associated with the issuance of shares of the Company’s common stock pursuant to the 2005 Stock Incentive Plan.
$0.7 million pre-tax and $0.6 million net of tax, or $0.4 per diluted share related to labor cost adjustments associated with European government and labor union programs.
James H. Dorton, Senior Vice President and Chief Financial Officer commented, “For the first quarter of 2010, we recorded revenues of $85.3 million, an increase of $27.4 million, or 47.3%. We believe this improvement in our revenue is primarily the result of improved underlying global demand from our automotive and industrial end markets.”
Mr. Dorton continued, “As a percentage of net sales, cost of goods sold for the quarter was 80.8% as compared to 96.8% for last year’s first quarter. The first quarter of 2009 was impacted by production inefficiencies, mainly in fixed costs and variable labor, due to the large drop in volume we experienced as a result of the global economic recession. In this year’s first quarter, we were able to favorably leverage production efficiencies due to increased revenues and our aggressive cost reduction initiatives.”
“Selling, general and administrative expenses were $7.9 million, or 9.2% of net sales for the first quarter of 2010 as compared to $6.9 million, or 11.9% of net sales for the first quarter of 2009. The increase in dollars was due mainly to the recording of approximately $1.1 million in non-cash charges associated with the issuance of shares of the Company’s common stock pursuant to the 2005 Stock Incentive Plan. There will be no other issuance of shares under this plan during 2010.”
Mr. Dorton concluded, “As announced, on March 9, 2010, we concluded the process of revising and amending our previously amended revolving credit facility with Key Bank as the administrative agent. We also amended the terms of the agreement of our private placement notes with Prudential Capital. The new covenants, which will be in effect through the expiration of the revolving credit facility in September 2011, reflect improving economic conditions and the resulting expected improvements in our financial results and outlook. At March 31, 2010, we were well within compliance of these new covenants and we had $87.6 million in outstanding debt which was a slight increase over the $87.0 million outstanding at year end. Although we plan to spend approximately $16.7 million to fund capital projects this year, in the long-term we will work hard to preserve a conservative balance sheet and to strengthen our capital structure by reducing our debt levels relative to cash flows.”
Roderick R. Baty, Chairman and Chief Executive Officer commented, “We are encouraged by our financial performance for the first quarter. We exceeded our business plan in both revenues and earnings for the quarter and customer ordering patterns remain strong for the second quarter. Although we remain optimistic about the second half of 2010, our optimism is guarded. For us to continue to meet our previously announced annual revenue guidance of $315 million to $335 million, the global economy must continue to strengthen. We recognize that we still have much to do to return our Company to historical levels of profitability and cash flow. For that reason, we will continue to manage our businesses aggressively by closely monitoring working capital, strictly controlling all discretionary spending and avoiding permanent increases to our cost structure going forward.”
Mr. Baty concluded, “During 2010 we anticipate spending approximately $16.7 million in capital, of which 65% will be used to fund new business programs at our Precision Metals business unit. Our new amended credit facilities, along with the positive cash flow from operations we expect to generate in 2010 will fund these exciting opportunities and provide the basis for our growth strategies in 2010 and beyond.”
NN, Inc. manufacturers and supplies high precision metal bearing components, industrial plastic and rubber products and precision metal components to a variety of markets on a global basis. Headquartered in Johnson City, Tennessee, NN has 12 manufacturing plants in the United States, Western Europe, Eastern Europe and China. NN, Inc. had sales of US $259 million in 2009.
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